CARES Act Unemployment Insurance Expansion and Stimulus Payments – Considerations for States
Jason Levitis, Levitis Strategies
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, 2020, includes two major provisions to get money into the hands of consumers amid the ongoing health and economic crises: a temporary expansion of unemployment insurance compensation (UI) and a direct stimulus payment to taxpayers. Both measures are designed to begin immediately. These payments and other recent changes create novel policy dynamics that are important to understand. At the same time, these payments create time-sensitive implementation challenges for states given interactions with eligibility for health care programs. This piece considers the policy implications and challenges for states and discusses potential state measures to address these challenges.
The CARES Act provides a $600-per-week UI increase through the end of July for everyone receiving UI. For individuals receiving this supplement for the duration, it will amount to about $10,000 in additional UI benefits. Under long-standing rules, UI is generally included in income for purposes of eligibility for both Medicaid and advance payments of the premium tax credit (APTC). But the CARES Act excludes the $600 UI supplement (and only the supplement) from income for Medicaid purposes. The Act does not carve out the UI supplement for APTC purposes. This creates a disconnection between the income measures used for the two programs. Under long-standing rules, APTC eligibility is based on expected annual income, whereas Medicaid eligibility is based on monthly income.
The CARES Act also provides an additional 13 weeks of UI eligibility, increasing the limit to 39 weeks through December 31, 2020. And it expands eligibility for UI to individuals who don’t normally qualify, including the self-employed, non-traditional workers like street vendors and ride-share drivers, and longer-term unemployed individuals who are prevented from working by the health crisis.
Finally, the CARES Act provides a stimulus payment of up to $1,200 per adult and $500 per dependent child, phasing out at higher incomes. This payment is excluded from income for both Medicaid and APTC purposes.
Separately, the Families First Coronavirus Response Act (the prior COVID response package) conditioned additional Medicaid funding for states on them satisfying a maintenance of effort (MOE) requirement that generally prohibits them from disenrolling individuals from Medicaid for the duration of the emergency, effectively creating a continuous eligibility requirement.
These new policies create unusual coverage dynamics that may be helpful for states to understand as they map implementation strategies.
- Income disconnect creates generosity cliff between Medicaid and APTC. Normally, the transition between Medicaid and APTC in states that have expanded Medicaid is relatively smooth from a generosity standpoint. That’s because an individual who earns just a bit too much for Medicaid (say, 140% of the federal poverty level, or FPL) is eligible for generous APTC and cost-sharing reductions (CSRs) that keep expected premium and cost-sharing expenses low. But the special rule for the UI supplement creates a cliff at that transition. For example, a single individual with income at 140% of FPL (about $17,500 per year) for Medicaid purposes who receives the full supplement would have income of about $27,500, or about 220% of FPL, for APTC purposes. At that level, the individual would qualify for only minimal CSRs and owe a substantial annual premium – about $2,000 per year. This cliff will be even larger if current monthly income is less than one-twelfth of expected annual income, as may be the case due to job loss.
- Medicaid continuous eligibility may mitigate uncertainty and churn. Under normal circumstances, many low-income individuals experience substantial income volatility that may cause them to (1) churn back and forth between Medicaid and APTC eligibility and (2) risk receiving excess APTC that they must pay back at tax time. The current economic crisis exacerbates this volatility, with many consumers seeing large income swings and having little ability to predict their 2020 income. And confusion about the new income rules may further exacerbate uncertainty about what income will count for APTC purposes. Medicaid’s continuous eligibility requirement during the emergency mitigates these risks by permitting consumers determined Medicaid-eligible to keep that coverage and avoid the need for APTC.
- More generous UI and mid-year enrollment may mitigate coverage gap in non-expansion states. Normally, unemployed individuals in states that have not expanded Medicaid may be without options for subsidized coverage. This is generally the case when expected annual income falls below 100% of FPL, which is common for unemployed individuals given limits on the scope, duration, and amount of UI benefits. By expanding UI along all these measures, the CARES Act is likely to push the APTC income of many unemployed individuals above the 100%-of-FPL threshold and thereby allow them to qualify for APTC. For example, if normal UI benefits are $378 per week (the national average), then 39 weeks of normal UI benefits (for example, April through December) plus the supplement comes to about $25,000 total – which alone exceeds 100% of the relevant FPL for families of one, two, or three individuals and is close to the FPL for a family of four. Income would be higher if more than one adult in the family received UI and would also include any 2020 income earned before loss of employment.
Key Implementation Challenges
The new rules – especially the UI supplement carveout and the disparate income measures for Medicaid and APTC – pose implementation challenges for state health agencies.
- Updating application systems and materials to accurately determine eligibility. Current application systems for APTC and Medicaid do not reflect the new rules and may be difficult to update on the immediate timeframe contemplated by the CARES Act. This may be especially challenging for states with integrated Medicaid and APTC eligibility systems, which need to apply both income definitions.
- Educating consumers and enrollment assisters about special rules. Applicants and assisters may be unaware of the new rules, may not understand the Medicaid-APTC disconnect and how it relates to current versus annual income, or may confuse the rules for the UI supplement and the stimulus payments.
- Determining how much UI is excludable. Even if applicants understand the rules, they may have trouble ascertaining what portion of their UI payments constitutes the baseline UI amount versus the supplement.
Some of these challenges could be mitigated through additional federal legislation – for example by carving the UI supplement out of APTC income, expanding APTC, and reducing the amount of APTC that taxpayers may be required to repay at tax time. But given the uncertain prospects for such measures, states are taking action on their own.
Potential State Strategies
- Update application materials where feasible to reflect new rules. State Medicaid agencies and state-based Marketplaces (SBMs) are taking steps to modify application materials to reflect the new rules. Given long lead times to update online application architecture, some agencies are focusing on adding or updating help text or other less-integrated content to explain how to comply with the new rules in the context of the existing architecture.
- Educate consumers and enrollment assisters about new rules and policy implications. States are developing plain-language FAQs and call scripts explaining the new rules for enrollment assisters, including navigators, brokers, and customer support staff. Current enrollees may also benefit from such explanations to help them determine if they need to report a change in circumstance and if so comply with the new rules. States that are conducting supplemental enrollment outreach may also wish to highlight the new rules. Finally, it may be helpful to share information about the policy dynamics, either to encourage enrollment or reduce surprise and confusion.
- Encourage state UI agencies to clearly itemize payments and note special rule. To avoid confusion about what fraction of UI benefits is the baseline amount versus the supplement, some state health officials are urging UI agencies to include language with UI payments that clearly labels the two amounts. This could involve sending separate, clearly labeled payments or itemizing a single periodic payment. If feasible, the UI agency could also include language with the payment noting that the supplement is excluded from Medicaid income. If clear labeling is infeasible given systems constraints, a backup approach would be to calculate the baseline amount by subtracting $600 from the weekly UI check. However, consumers may not know if a given check includes the supplement or not, or for how many weeks. UI agencies face operational constraints amid record-breaking new applications, so initial payments and supplements may be delayed. Once new or increased payments start going out, payments may initially be larger to catch up. Given that, subtracting $600 from a given payment may not provide the correct value.
- Use consistent terminology to increase clarity. Where feasible, Medicaid and Marketplace applications, UI payments, and materials for assisters and customer service should all use the same terminology for key amounts, including the UI supplement, the baseline UI payment, and the stimulus check. For example, if the UI payment breaks out the “baseline weekly UI payment” and the “temporary CARES Act UI increase,” then those same terms should be used in SBM and Medicaid application materials and in call scripts. For states that rely on the federally facilitated Marketplace (FFM), this may mean conforming to the language in the FFM application. The FFM is currently working to reflect the new rules in its application language.
- Avoid overestimating annual income based on temporary UI supplement. Historically, a common approach to determining APTC eligibility during a special enrollment period is to assume that current income will continue for the rest of the year. For example, for an application submitted in early April, annual income might be projected as earnings in January through March plus nine times expected April income. But under current circumstance such an approach may overstate an applicant’s likely income and therefore generally provide too little APTC. That’s because, for those receiving UI, current income is inflated by the UI supplement, which is set to expire at the end of July. In such cases, a better approach may be to take earnings so far (January through March), plus April income (including the UI supplement) times 4 (for April through July), plus the baseline UI amount times 5 (August through December). This approach could be suggested to enrollment assisters and, in SBM states, incorporated into application materials. In states that have not expanded Medicaid, it may be worthwhile to consider the specific circumstances of the applicant, including family size.
- In states without integrated enrollment systems, consider encouraging consumers who are likely Medicaid-eligible to enroll through Medicaid agencies. Given the challenges of updating enrollment systems and the import of the Medicaid MOE rule, several states that maintain a separate Medicaid eligibility system are encouraging consumers likely to be Medicaid-eligible to apply directly through the Medicaid agency. Medicaid applications need consider only income definition, so it may be easier to update them for the new rules. Medicaid-only applications may also be processed more quickly and with fewer administrative hurdles.
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